SBA guidance is also silent so far on the form or format required for the application to forgive the PPP loan. However, the SBA has made it clear the forgiveness request must include:
- Documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations
- A borrower certification that the documents are true and that the forgiveness amount was used to keep employees and make eligible mortgage interest, rent, and utility payments.
For purposes of loan forgiveness, the standard of “full-time equivalent employees” (FTEs) determines the extent to which the loan forgiveness amount will be reduced if the borrower has reduced its workforce (FAQ 36). The SBA has not clearly defined how to calculate FTE employees, but it has noted that its calculation of employees for size eligibility purposes (the 500-employee threshold) was not based on FTEs. Rather, it required borrowers to count each individual employee, whether full- or part-time.
The SBA has provided specific guidance on forgiveness eligibility for loans to individuals with self-employment income who file a form 1040 Schedule C. Documents that should be filed with the forgiveness application for these self-employed borrowers include:
- The borrower certification noted above
- IRS Form 941
- State quarterly wage unemployment insurance tax reporting forms or equivalent payroll processor records that best correspond to the covered period (with evidence of any retirement and health insurance contributions)
- Evidence of business rent, business mortgage interest payments on real or personal property, or business utility payments during the covered period if borrower used loan proceeds for those purposes
- 2019 Form 1040 Schedule C that was provided at the time of the PPP loan application in order to determine the amount of net profit allocated to the owner for the eight-week covered period.
Guidance for other employers in general on documentation for forgiveness isn’t spelled out specifically. However, the American Institute of CPAs recently published recommendations for PPP loan forgiveness documentation aimed at driving consistency among lenders and reducing borrower confusion. Among documents the AICPA recommends as forgiveness documentation for employers:
Payroll tax reports: 2020 IRS Forms 941, state income and unemployment tax returns, and other reports from payroll providers that reflect employment tax returns filed
Payroll reports that include: gross wages for each employee for eight-week covered period and the most recent full quarter before the 8-week covered period; the identification of any employees whose principal place of residence is outside the U.S. or who received annualized pay of more than $100,000 during any period in 2019; state and local employer taxes assessed on an employee’s compensation (i.e., State Unemployment Tax Act, or SUTA) during the eight-week covered period
Employee counts: The average number of FTEs per month for both the eight-week period and either a) Feb. 15 through June 30, 2019, or b) Jan. 1 through Feb. 29, 2020. The borrower elects whether to compare a) or b) to the eight-week covered period. [According to recent SBA guidance, seasonal businesses determining maximum loan amounts can compare the average number of FTEs per month during the eight-week period to either a) the period Feb. 15 through June 30, 2019, b) March 1-June 30, 2019, or c) any consecutive 12-week period between May 1, 2019 and Sept. 15, 2019.]
Group health care benefit cost documentation: Showing total costs paid for all health care benefits, including insurance premiums paid by the organization under a group health plan for all employees and company owners (excluding employee withholdings for their portion of contributions to the plan).
Retirement plan benefit cost documentation: Showing total costs paid by the organization for all retirement plan funding for all employees and company owners (excluding employee withholdings for their portion of contributions).
Other documentation: Canceled checks, receipts, account statements, or other documentation of payment for other eligible costs incurred and paid during the covered period such as mortgage interest, lease payments, utility payments.
